Australia explains interim Part IVA approach after Hilton hotel decision

The statement responds to the Federal Court’s 9 September 2026 decision in Hilton International Australia Pty Ltd v Commissioner of Taxation (No 2) [2026] FCA 1325. The Court upheld the Commissioner’s general anti-avoidance determination. Hilton has appealed to the Full Federal Court, so the contested issues are not finally settled; the ATO is accepting comments on its interim position until 20 November 2026.^[1][2]

The pre-sale restructure and tax benefit

Hilton International Australia was provisional head company of an Australian multiple-entry consolidated group under a Luxembourg parent. Before the 2015 Hilton Hotel Sydney business sale, the group consolidated hotel assets worth about A$449 million in an eligible tier-1 company and used substantial intragroup debt. The parent sold the company’s shares for about A$29 million, while the purchaser repaid an approximately A$420 million intercompany note.^[1]

The taxpayer returned a net capital gain of about A$21 million. The Commissioner identified three alternative courses, each producing an approximately A$179 million net capital gain and the same tax benefit, and made a cancellation determination under section 177F(1)(a) of the Income Tax Assessment Act 1936.^[1][3]

Part IVA can support more than one comparator

The ATO accepts the Court’s view that section 177CB(3) can permit more than one reasonable alternative to the challenged scheme. A comparator need not preserve the transaction’s legal form if its commercial and economic substance generally accords with what occurred. An alternative that is itself an avoidance arrangement subject to Part IVA cannot provide a reasonable comparison.^[1][3]

Administrative position pending appeal

Where the choice changes the tax-benefit amount, the ATO will continue to identify one preferred alternative while also identifying every alternative it considers reasonable. That retains its Hicks administrative approach rather than treating the first-instance observations as final law. Multinational groups should test Australian pre-sale restructures against more than one commercially plausible counterfactual and document the non-tax reasons for debt and entity changes. The statement is interim administrative guidance, not legislation or a final appellate ruling.^[1][3]